Finance in lower-income countries
Subtitle: an empirical exploration
By: prepared by Enrica Detragiache, Poonam Gupta, and Thierry Tressel.
Contributors: Gupta, Poonam, 1964-; Tressel, Thierry.; International Monetary Fund. Research Dept.
Series: IMF working paper -- WP/05/167
Publisher: International Monetary Fund, Research Dept.
Published: 2005
Place of publication: Washington, D.C
Language: eng
Number of pages: 48
Subjects: Finance -- Developing countries.; Banks and banking -- Developing countries.; Developing countries -- Economic conditions.; Developing countries -- Economic policy.
Description: This paper considers how a comprehensive set of factors relates to financial sector performance in low-income countries (LICs). It finds that corruption and inflation are associated with a shallower and less efficient financial system, while legal origin and characteristics of the supervisory and regulatory framework have no significant relationship with performance. Moreover, better contract enforcement and information about borrowers are associated with more private sector credit. Some results are surprising. Countries with more foreign bank penetration seem to have shallower and not necessarily more efficient financial sectors, while a larger presence of state-owned banks is correlated with more bank deposits and lower overhead costs, even after controlling for market size and concentration. Although these relationships are robust, more research is needed to ascertain the direction of causality and identify channels of transmission before deriving policy implications.
Notes: "August 2005."

Includes bibliographical references (p. 45-48).

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